Sun Pharma buys Taro Pharmaceuticals to increase US reach

India's largest pharmaceutical company, Sun Pharmaceutical
Industries (Sun), has agreed to buy Israel-based generics firm,
Taro Pharmaceutical Industries, for USD 230m in cash and an extra
USD 224m (USD 454m) to refinance Taro's debt, according to a
company statement release on 21 May.

Taro reported on 20 March that it would report a substantial loss
in FY06, which would put it in breach of conditions on bank loans.
The Taro acquisition will help Sun to expand its marketing network
in the US, without having to establish a separate entity in the
region. Sun anticipates an increase in the demand for generic drugs
as healthcare costs increase and blockbuster drugs lose patent
protection.

The acquisition will provide Sun with an extra 170 scientists and
drugs for childhood illnesses and skin diseases. The company's
shares rose INR 36.8 (USD 0.91), or 3.6 per cent, to INR 1,050 (USD
25.90) on the Mumbai Stock Exchange, gaining a total of 6.9 per
cent so far in 2007.

Sun says it will use its profits and the proceeds from the USD 350m
sale of bonds convertible into shares to fund the acquisition,
which is subject approval by Taro shareholders and a regulatory
review.

According to local media reports, Franklin Advisers and Templeton,
who together hold a nine per cent share in Taro, filed a request
for a temporary injunction against the deal on 19 May, adding that
it could harm minority shareholders. The motion was heard on 21 May
and a ruling is due soon.

Sun's USD 7.75-a-share offer values Taro at 27 per cent higher than
its closing price of USD 6.10 on 18 May. Taro shares have lost 86
per cent of their value over the past three years.

Sun reported robust financials for the year ending 31 March 2007,
with net sales were INR 21.3bn (USD 528.8m), a 30 per cent increase
from INR 16.4bn (USD 406.9m) in the year ending 31 March 2006.
Sun's international business grew 39 per cent, while EBITDA margin
increased to 32.7 per cent from 30.8 per cent in the previous
financial year, despite a 51 per cent increase in R&D revenue
expense. Net profit was INR 7.7bn (USD 192.1m), an increase of 35
per cent, while Sun's net margin at 37 per cent for the year ending
31 March 2007 was higher than the previous year.